I spent two days in Phoenix this week at the CFSI Emerge Conference. This an annual event put on by CFSI (now called the Financial Health Network) focused on financial health. There were several excellent sessions but the one that I keep thinking about was one about employer innovation in financial wellness. The speakers were Peter Hazlehurst, the Head of Payments and Risk at Uber and Shawn Leavitt, the SVP of Total Rewards at Comcast.
What was fascinating to me was how much financial services is a central part of their businesses, particularly in the case of Uber. They were one of the first companies to make payments frictionless and invisible and they continue to break new ground when it comes to financial services.
Let’s start with small dollar lending. Uber issues drivers a debit card where they can receive their earnings but they can also go negative on the balance of that card up to $100. So, when a driver has a zero balance on their card they can still go and fill up with gas before they start their shift. What is also really innovative is that Uber allows for almost real time earnings. Drivers can request their balance be sent to their debit card up to five times a day.
For some drivers they literally have no money. So, when they wake up in the morning they desperately need to earn money from Uber to survive. So they will drive for a couple hours and then be able to afford breakfast, a few more hours then lunch and more hours in the afternoon and they can feed their family at dinner. This real time payment is powered by Visa Direct as they can push money to a debit card for very low cost. This could become a model for many other industries as employees and contractors demand payment quickly for work already done.
What was most interesting is when Peter Hazlehurst said that Uber wants to make a dollar earned at Uber 20% – 30% more valuable. While he didn’t say exactly how Uber would do that one way is through the delivery of more valuable financial services. For example, he said that some Uber drivers have poor credit and often overdraw their bank accounts. They often send money they have earned through Western Union to their family in another country. Now, he didn’t say Uber would be developing services to satisfy these needs but you can clearly see where they might go here.
This is something that Brett King talked about in his latest book, Banking 4.0. He said that banking will become an embedded function in a banking as a service model. This means that companies like Uber can provide banking services, in partnership with an actual bank (Uber’s Visa debit card is issued by GoBank), but the bank operates in the background. We are seeing this with the recently announced T-Mobile Money where a bank account is offered in partnership with BankMobile.
The context of the discussion at Emerge was around financial wellness facilitated by employers. Comcast said they want to personalize payroll at the individual level. They have piloted an emergency loan program that had significant uptake. An employee might have a credit score of 540 and not be able to get a loan beyond a payday lender. But there is no reason why Comcast shouldn’t give a long time employee a $1,000 loan at 6% and have them pay it back through a payroll deduction.
The trend here is that large companies like Uber and Comcast will offer more and more financial services as time goes on. By controlling the financial side of any interaction with their customers or employees they can boost brand loyalty, drive more business or increase employee retention. Or maybe do all three. Banking as a service is only going to grow from here.